City of Burlington, Vermont

City of Burlington, Vermont

DOWNTOWN HOUSING STRATEGY REPORT

May 2014

Objective: develop a housing strategy that positions Burlington for 21st century prosperity.

CONTENTS

Introduction

3

Prepared for:

Executive Summary

4

I. Planning Framework

8

II. State of the Market

10

III. Housing's Role in Shaping the Future

16

IV. Key Strategies

26

1. Focus on the CBD

28

2. Build strategic student housing

32

3. Incentivize new housing production

35

Prepared by: HR&A Advisors, Inc.

4. Supportive land use policy

37



5. Link to economic development

41

V. Appendix

44

Contact:

Candace P. Damon Vice-Chairman, HR&A Advisors

212.977.2706

cdamon@

Burlington Downtown Housing Strategy Report

2

Introduction

Burlington has succeeded in ways to which most cities of comparable size can only aspire -- the cultivation of a vibrant mixed-use downtown, high quality of life, a progressive culture oriented around the University of Vermont and Champlain College, and a robust medical employment base due to the presence of Fletcher Allen Health Care. These attributes have made Burlington a highly desirable place to live, attracting people from elsewhere in New England and beyond. These happy circumstances have, however, placed significant pressure on the local housing market as an influx of new residents and college students compete for a limited supply of available homes.

The lack of market rate housing development over the past decade, particularly in Burlington's downtown, has created supply constraints that further exacerbate increasing housing costs driven by high demand from multiple segments of the resident population. As a result, Burlington is now at an inflection point where it can choose to evolve as a vibrant, albeit increasingly expensive and less walkable college town, or emerge as a leading example of 21st century economic resilience: a small city that supports the creation of new housing as part of a broader economic development strategy that fosters a walkable downtown and dynamism more often found in larger places.

With this opportunity to shape the future in mind, the City of Burlington Community & Economic Development Office (CEDO) issued a Request for Proposals (RFP) for a study to evaluate the City's chronic housing shortage and to identify potential solutions.

In July of 2013, HR&A Advisors, Inc. (HR&A) was selected by the City to commence work on a Downtown Housing Strategy Report. As part of this effort, HR&A analyzed housing market conditions and growth patterns in Downtown Burlington, and then benchmarked recent market performance against that of comparable cities across the country to develop recommendations on how the City can foster strategic housing development in targeted locations in and around the downtown. For the purposes of this study, HR&A defined Downtown Burlington as the area encompassing a ?-mile radius around the intersection of Bank Street and Church Street.

The following report summarizes HR&A's findings and recommendations for strategic initiatives that take on the challenges impeding housing production in Burlington.

Burlington Downtown Housing Strategy Report| INTRODUCTION

3

Executive Summary

KEY FINDINGS 1. AFFORDABILITY CRISIS

Significant demand for housing coupled with limited production of new units has created an affordability crisis. Demand for downtown housing is driven by an influx of new residents from Vermont, New England, and beyond, as well as a sizable student population with limited housing options on and off campus. Meanwhile, despite historically low vacancy rates of around 1%, only 222 units were built downtown between 2002 and 20131, of which 102 units were market rate and only 18 units were market rate rentals. As a result, the downtown market is facing severe supply constraints, rising home prices, and escalating rents that are further impacting affordability in a market where a typical renter household allocates more than 44% of total income to housing costs -- significantly above that of other cities.

2. GOOD DOWNTOWN BONES

Compared to similarly sized "college towns" and peer cities in New England, Burlington has a relatively dynamic downtown population. There are approximately 4,750 households residing within a half-mile radius of Burlington's downtown core, representing 5.6% of total metropolitan area households. Of the comparable cities analyzed, only Madison, WI has a larger downtown resident base with 9,700 households, which is, however, only 4.0% of its metropolitan area. There is ample opportunity to build on this historic pattern to create a more walkable, robust urban core.

3. LOSING YOUNG PROFESSIONALS AND FAMILIES

However, recent growth in downtown Burlington has not kept pace with other cities, and the City is in fact losing young professionals and family households. Between 2000 and 2012, downtown Burlington added only 130 new households1, representing less than 3% growth over the 12 years. Over the same time period, the number of households in the broader Burlington metro area increased by over 10%, suggesting that downtown has been losing resident market share to neighboring jurisdictions. Downtown's modest growth is a reflection of the broader region's loss of young professional and family households that is offset by a growing student and empty nester market.

4. A DYNAMIC ECONOMY = NEW DEMAND

Burlington's economy is becoming increasingly diverse and adding new jobs, a trend that when coupled with development of adequate housing can be leveraged to reverse the loss of young professionals. Between 2000 and 2012, the Burlington region added 1,360 jobs, but lost 2,360 jobs employing residents between the ages of 25 to 34. Many of these job losses were concentrated in the computer and electronic product manufacturing sector, a reflection of labor force reduction at the IBM Plant in Essex Junction. As the region continues to move away from manufacturing and expand its healthcare, professional services, technology, and tourism sectors, new housing will be needed across a range of price points to serve all segments of the young labor force.

1HOUSING UNITS VS. HOUSEHOLDS: The concept of a household does not assume that the number of households and housing units are or should be equal. Where a housing unit represents a physical structure, a household is a group of people living together under one roof. There are several reasons why these data points may not match ? 1) vacant housing units do not contain households; 2) seasonal residents, a demographic drawn to Burlington's downtown condominium market, are not counted as local households; and 3) the difficulty in accurately collecting information on a highly transient student population, many of whom claim a primary residence in their hometowns, through US Census surveys.

Burlington Downtown Housing Strategy Report| EXECUTIVE SUMMARY

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KEY FINDINGS (CONTINUED)

5. REGIONAL HOUSING-JOBS IMBALANCE

Many of the workers employed in the region's fastest growing industries are commuting between jurisdictions to reach their jobs, especially those in low-wage industries. The region's lowwage jobs are primarily concentrated in three jurisdictions ? Burlington, South Burlington, and Williston. Of the three, only Burlington comes close to balancing its share of jobs in low-wage industries with its share of residents working in these sectors. Meanwhile, Burlington is home to a large share of the region's high-wage jobs in Professionals Services, Education, and Healthcare, but very few of these workers actually live in the city. Expanding the range of housing options throughout the region has the potential to reduce commuting burdens and improve the housing-jobs balance.

6. WIDENING HOUSING-WAGE GAP

Many residents working in the Burlington Metro Area's fastest growing occupations, especially those in service industries, struggle to find affordable housing. The typical renter household needs 1.6 full-time jobs paying the average renter wage to afford a two-bedroom apartment at a Fair Market Rent (FMR) of $1,029 per month. This challenge is particularly acute in highdemand employment centers, such as downtown Burlington, where average market rents for a two-bedroom apartment are nearly twice the FMR rate. Even the cost of a downtown studio is higher than the FMR rate for a two-bedroom unit, which forces many workers to live further away from their jobs.

7. LEARN FROM OTHERS

As Burlington continues to evolve, there is an opportunity to learn from the successes of larger cities in creating opportunities for new housing to help cultivate a diverse and innovative economy. "Next tier" cities such as Portland, OR, Austin, TX and Nashville, TN provide aspirational lessons on how to leverage economic and market strengths, create land use policy, and prioritize public investment to support strategically located new housing development. It is worth noting that while growth in these "next tier" cities has far outpaced Burlington's over the past decade, the cost of housing in these other cities remains much more affordable.

Burlington Downtown Housing Strategy Report| EXECUTIVE SUMMARY

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